A smart card is a card that is embedded with either
a microprocessor and a memory chip (IC card like our AC0S1) or only a
memory chip with non-programmable logic (memory card like SLE smart cards).
The IC card can add, delete, and otherwise manipulate information on the
card, while a memory-chip card (for example, pre-paid phone cards) can
only undertake a pre-defined operation.

Smart cards, unlike magnetic stripe cards, can carry all necessary functions
and information on the card. Therefore, they do not require access to
remote databases at the time of the transaction.

Today, there are three categories of smart cards, all of which are evolving
rapidly into new markets and applications:

Integrated Circuit (IC) Microprocessor Cards. Microprocessor
cards (also generally referred to by the industry as "chip cards"
or "IC cards") offer greater memory storage and security of
data than a traditional mag stripe card. Smart cards that are chip cards
or IC cards also can process data on the card. The current generation
of chip cards has an eight-bit processor, 16KB read-only memory, and
512 bytes of random-access memory. This gives them the equivalent processing
power of the original IBM-XT computer, albeit with slightly less memory
capacity.

These smart cards are used for a variety applications, especially
those that have cryptography built in, which requires manipulation
of large numbers. Thus, chip cards have been the main platform for
cards that hold a secure digital identity. Some examples of these
cards are:

Cards that hold money ("stored value cards")

Card that hold money equivalents (for example, "affinity
cards)

Cards that provide secure access to a network

Cards that secure cellular phones from fraud

Cards that allow set-top boxes on televisions to remain secure
from piracy

Integrated Circuit (IC) Memory Cards. IC memory cards can hold
up to 1-64 KB of data, but have no processor on the card with which
to manipulate that data. Thus, they are dependent on the smart card
reader (also known as the card-accepting device) for their processing
and are suitable for uses where the card performs a fixed operation.

Memory cards represent the bulk of the 600 million smart cards sold
last year, primarily for pre-paid, disposable-card applications like
pre-paid phone cards. Memory cards are popular as high-security alternatives
to mag stripe cards.

Optical Memory Cards. Optical memory cards look like a card
with a piece of a CD glued on top - which is basically what they are.
Optical memory cards can store up to 4 MB of data. But once written,
the data can not be changed or removed. Thus, this type of card is ideal
for record keeping - for example medical files, driving records, or
travel histories. Today, these cards have no processor in them (although
this is coming in the near future). While the cards are comparable in
price to chip cards, the card readers use non-standard protocols and
are expensive.

The first smart card was developed in 1974, by independent inventor Roland
Moreno. Smart card use in Europe and Asia is outpacing North America,
but smart card growth is expected to continue at a brisk pace.

By
way of comparison, there are over 900 million credit cards in circulation
today. Major uses will include providing enhanced financial services,
increasing the security and flexibility of cellular phones, and securing
satellite and cable transmissions in TV set-top boxes.